EU probing ChemChina's bid for Syngenta

NataliaDrozdiak

BRUSSELS--The European Union's antitrust watchdog on Friday said it opened an in-depth probe into plans by China National Chemical Corp. to acquire Syngenta AG to assess whether the deal would lower competition for crop protection products and the supply of some input chemicals.

The European Commission said the two companies, especially through ChemChina's Adama unit, have "strong overlapping portfolios" of crop protection products, such as herbicides and insecticides, and noted that the "transaction would take place in an industry that is already relatively consolidated." The commission set a deadline for March 15 to complete its review.

"We need to carefully assess whether the proposed merger would lead to higher prices or a reduced choice for farmers," said EU Antitrust Chief Margrethe Vestager.

The announcement was expected after Swiss seed and pesticide maker Syngenta said earlier this week that regulatory approval of its proposed acquisition by ChemChina is likely to be delayed into early 2017 as regulators seek more information amid a consolidation wave in the sector.

Syngenta's review comes as the EU is faced with a wave of large tie-ups in the sector, including plans by Bayer AG to acquire Monsanto Co. and plans by Dow Chemical Co. and DuPont Co. to first merge and then subsequently split in three.

The EU usually assesses mergers on a case-by-case basis and in the order in which they have been officially registered with the regulator. But the EU's antitrust chief, Margrethe Vestager, has previously signaled that her department's review of the deals would take into consideration the fact that several mergers in the agricultural sector were taking place at one time.

Syngenta this week said the announcement of the Bayer-Monsanto deal prompted more requests for information from regulators about their own deal with ChemChina.

Syngenta hasn't submitted remedies to the commission but earlier this week said if remedies were requested from European or U.S. regulators, the company would work with them to "resolve these as quickly as possible."

The EU said it was cooperating closely on the investigation into the deal with other competition authorities around the world, including those in the U.S., Brazil and Canada.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

BRUSSELS -- The European Union's antitrust watchdog will launch an in-depth probe into China National Chemical Corp.'s plan to buy Syngenta AG to determine if the deal would lower competition for crop-protection products.

The investigation will focus on whether combining Swiss-based Syngenta, which sells about one-fifth of the world's pesticides, with a ChemChina-owned company that supplies generic alternatives would leave farmers with higher chemical costs or fewer available products, according to the EU.

The move was expected after Syngenta signaled earlier this week that its sale would likely be delayed until early 2017. It reflects the level of scrutiny by antitrust authorities for farm-sector deals at a time when farmers in Europe and the U.S. grapple with low grain prices following consecutive bumper crops that swelled global supplies.

The European Commission, the EU's executive arm, said Friday that Syngenta and Adama Agricultural Solutions Ltd., an Israeli maker of generic pesticides that is controlled by ChemChina, had "strong overlapping portfolios" of crop-protection products such as herbicides and insecticides. The commission set a deadline for March 15 to complete its review.

"We need to carefully assess whether the proposed merger would lead to higher prices or a reduced choice for farmers," said EU Antitrust Chief Margrethe Vestager.

The ChemChina-Syngenta deal would ratchet up consolidation in "an industry that is already relatively concentrated," EU officials added.

Antitrust officials in the bloc are cooperating with counterparts in the U.S., Brazil and Canada as part of the investigation, according to the EU.

Syngenta and ChemChina "intend to continue constructive discussions with the EU authorities in order to conclude the review as early as possible, " Sygenta officials said.

Syngenta agreed to sell itself to ChemChina for $43 billion in February, a deal that would be the biggest-ever foreign purchase by a Chinese company and a way for China to modernize its agricultural sector.

European Union officials on Friday highlighted Syngenta and Adama's "relatively high combined market shares" in pesticides used to grow grain, cotton, fruits and vegetables, and whether a combined company would limit access to chemical compounds needed by competitors to make rival products. In many products, Adama may represent "an important generic competitor" to Syngenta, EU officials said.

The deal isn't the only one in the sector that regulators are keeping an eye on. Rivals DuPont Co. and Dow Chemical Co. are pursuing their own combination, and Bayer AG agreed in September to purchase U.S. biotech seed giant Monsanto Co. for $57 billion. The planned farm-sector deals would reduce the number of large players to four from six.

Ms. Vestager, the bloc's antitrust chief, has signaled that the review would take into account that several mergers in the sector were taking place at the same time.

Syngenta this week said the announcement of the Bayer-Monsanto deal prompted more requests for information from regulators about its combination with ChemChina.

Syngenta earlier this week said if regulators asked for antitrust remedies, the company would work to "resolve these as quickly as possible."

Syngenta shares in European trading closed 1.2% higher Friday but finished the week down 5.2% after sliding on the company's announcement of the longer review. Despite the delay, analysts remain confident in the deal, with Sanford C. Bernstein telling clients in a research note this week that the firm estimates a 95% likelihood it will go through.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com and Jacob Bunge at jacob.bunge@wsj.com

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